“The only thing that is constant is change”
The US stock market, as measured by the S&P 500 Index (S&P, see the chart below), finished the month of August +2.70% above the BLUE LINE, down from +5.00% above the BLUE LINE at the end of July. We continue to categorize the primary trend as Neutral primarily due to price behavior remaining within what we believe to be a sideways trend.
Chart courtesy of StockCharts.com
As a quick reminder to our readers, we monitor the relationship between price and the BLUE LINE over time to help identify which stock markets worldwide are experiencing rising primary trends, sideways primary trends, and declining primary trends. We prefer to invest in those markets experiencing rising or sideways primary trends, while avoiding those markets experiencing declining primary trends. The BLUE LINE helps us identify these trends – and when changes may be taking place between them.
SPECIAL UPDATE: THE DOW JONES INDUSTRIAL AVERAGE
The weekly* chart below has been updated from last month for the Dow Jones Industrial Average. I suggest you click here to familiarize yourself with last month’s comments before reading further.
Chart courtesy of StockCharts.com
Over the past thirty days, price declined out of what is believed to be an ascending wedge, identified in the chart above by the converging, red-dashed lines. When you compare this chart to the one from last month, you will notice price corrected down through the bottom red-dashed line. Thereafter, each rally attempt over the past three weeks has stopped rising when price reached the bottom red dashed line. IF our assessment of this technical formation as an ascending wedge is correct, we believe investors should expect further price decline in the days or weeks ahead.
With that said, we continue to believe the primary trend is a sideways or consolidating trend. As such, if the Dow Jones Industrial Average declines back towards the 24,000 price level, we do not believe investors should be surprised. If price remains within the horizontal gray-dashed lines, the sideways primary trend is prevailing. We suggest you ignore the media narrative and stay focused on the primary trend.
Thank you for reading the BLUE LINE INVESTING® PRIMARY TREND update, and please do not hesitate to call us with questions at (833) 258-2583.
* Each vertical line on the chart represents one week of price change.
BLUE LINE INVESTING® (BLI) is an investment process that seeks to align investment decisions with the prevailing primary trend of the financial markets. BLI seeks to remain fully invested when the financial markets are experiencing either a long-term rising primary trend or a short-to-intermediate sideways trend. When the primary trend begins declining however, the process follows a 3-phase sell process to attempt to limit downside loss. We believe Warren Buffett said it best with his two rules: “Rule No. 1 – Never lose money. Rule No. 2 – Never forget Rule No. 1.”
The S&P 500 Index is one of the most commonly followed equity indices, and many consider it one of the best representations of the U.S. stock market, and a bellwether for the U.S. economy. It is comprised of 500 large companies having common stock listed on the NYSE or NASDAQ. The volatility (beta) of the account may be greater or less than the index. It is not possible to invest directly in this index.
Technical analysis is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volumes. Technical analysis attempts to predict a future stock price or direction based on market trends. The assumption is that the market follows discernible patterns and if these patterns can be identified then a prediction can be made. The risk is that markets may not always follow patterns. There are certain limitations to technical analysis research, such as the calculation results being impacted by changes in security price during periods of market volatility. Technical analysis is one of many indicators that may be used to analyze market data for investing purposes and should not be considered a guaranteed prediction of market activity. The opinions expressed are those of BLI. The opinions referenced are as of the date of publication and are subject to change without notice. BLI reserves the right to modify its current investment strategies based on changing market dynamics or client needs.
Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The information contained herein should not be considered a recommendation to purchase or sell any particular security. Forward looking statements cannot be guaranteed.
Advisory services offered through Aptus Capital Advisors, LLC, a Registered Investment Adviser registered with the Securities and Exchange Commission. Registration does not imply a certain level or skill or training. More information about the advisor, its investment strategies and objectives, is included in the firm’s Form ADV Part 2, which can be obtained, at no charge, by calling (251) 517-7198. Aptus Capital Advisors, LLC is headquartered in Fairhope, Alabama.